FERC Nominees Wood, Brownell Visit Capitol Hill

Texas regulator Pat H. Wood III and Pennsylvania regulator Nora M. Brownell made their first public appearances in Washington, D.C. last week since being nominated by the White House as FERC commissioners. But mindful of their pending Senate confirmation hearings, the two were mum on the critical issues that will confront them when they assume office.

"Bear with us, we're on a good behavior program," Brownell said, as she side-stepped questions on issues before FERC during a conference sponsored by the National Energy Marketers Association (NEMA) last Tuesday. Brownell and Wood met with lawmakers on Capitol Hill during the day to discuss their nominations.

While the two avoided commenting on controversial issues, Brownell provided insight into the kind of commissioner she has been at the Pennsylvania Public Utility Commission, and the issues that have been important to her in opening up the state's electric markets to competition. Wood, who is rumored as a possible replacement for current FERC Chairman Curt Hebert, gave few clues on this score, however (See NGI, April 2).

Brownell indicated that she thinks feedback from companies is important for regulators. "I think there's been a tradition that people can't be candid with PUC staff or commissioners because there'll be some push-back. It's critically important as you educate us [regulators] and our staff, to be as candid as you will. We need to change that dynamic," she told energy marketers and customers.

Moreover, energy companies should "focus now on leveraging [the] opportunity" being provided by the White House energy task force, Brownell said. "I think we need to be much more effective in terms of working across groups, to come to Congress and to.....the executive branch with solutions, instead of expecting them to solve" the problems. "We know our business better than they do," she noted.

Brownell, who called herself a "passionate believer in free markets," hails from a state that has received very high marks for the way it has opened its retail power markets. "We were lucky in that we were in a market with an ISO that was fully functioning.....[and we had] sufficient generation," she said. In addition, the state's regulators, legislators and stakeholders made a lot of right moves, Brownell said.

Wood, currently chairman of the Texas Public Utility Commission, also painted a favorable generation picture for Texas, estimating the state will have 23% excess capacity this summer and about 30% excess capacity in the summer of 2002. He reported that total investment in new generation facilities in the state has been $21 billion over the last couple of years, with 27 new plants built and more on the way. In addition, he said the PUC has approved $1.5 billion in new transmission facilities.

The key lesson to be learned from restructuring is that supply and demand must be kept in balance, Brownell said. "I can't say that any clearer. I think we all knew that. We just didn't realize what the impact of that was." Also, the ISO operator should be "truly independent," she noted, adding that the two words should be underlined. She said market transparency was essential as well, at the wholesale and retail levels.

In deregulating the Pennsylvania electric markets, "one of the things that I've learned is that the classic regulatory models are not responsive to markets," Brownell noted during the NEMA gathering. She advised companies to inform regulators that "you're willing to take the risk of changing the rules as we go along."

Brownell does not believe it is the job of regulators to save failing businesses. "It is unrealistic to expect regulators.....[to] try to make rules to fit certain specific business needs."

Looking to the future, she thinks it is important for regulators to establish uniform business standards. "If there is anything that I really regret, it's not pushing that earlier and faster, because I think the cost of that has been enormous and I think [the lack of standards has] created incredible barriers for entry," Brownell said. "If we can't get it done at a national level, at the very least we need to do it at the regional level."

In addition, regulators "need to establish clear rules and structures for market monitoring" to assure customers that the exercise of market power is being kept in check, she noted. Wood agreed this was a critical issue. "Market power is something we have worried about since I've been on the commission." He noted that Reliant Energy, which is headquartered in Houston, split its generation and transmission assets into separate companies in response to such concerns. This "may be a template" for other energy companies in the state, Wood said, although the PUC has not mandated such action.

There needs to be greater emphasis on demand-side management efforts as well, Brownell said. In Pennsylvania, "we are just getting to that, and I wish we had done it earlier. We are going to push it as fast as we can." Furthermore, "we need to bring new technologies to market as quickly as we can because we need to have people see tangible benefits, and we need investment dollars going to these technologies," she noted.

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